Thursday, December 05, 2013
Latitud- deja vu again?
For QE30/9/2013, Latitud's net profit rose 145% q-o-q or 62% y-o-y to RM14.6 million while revenue rose 42% q-o-q or 27% y-o-y to RM177 million. Top-line grew because of increase capacity for the Vietnamese plant of about USD1 mil per month; more order received; and, higher USD exchange rate. Bottom-line improved due to better gross profit margin coupled with the decrease in finance costs and increase in unrealized forex gain (with USD strengthening against MYR).
The improved performance is due substantially to the strong recovery in the US housing market. I have mentioned this before as Latitud exports a significant portion of its output to the US (here).
Table 1: Latitud's last 8 quarterly results
Chart 1: Latitud's last 33 quarterly results
Latitud (closed at RM1.74 yesterday) is now trading at a PE of 4.5 times (based on last 4 quarters' EPS of 30.8 sen). At this PE, Latitud is deemed fairly attractive.
Latitud had a sharp rally to test its February-March 2010 high of RM1.75. A break above this level would be a positive for the stock but chances are good that the first attempt would not succeed. If we look back into its earning record, we would see that at end of February 2010, Latitud reported a second outstanding quarterly net profit in QE31/12/2009. The EPS of 17 sen for that quarter equaled the EPS for QE30/9/2009. In fact, Latitud's EPS for the 4-quarter ended 31/12/2009 was 49 sen! I wonder whether we are witnessing a repeat of another too-good-to-be-true quarterly earning. (Note: This is the reason why I hesitated posting on this stock for one week!)
Chart 2: Latitud's weekly chart as at Dec 4, 2013 (Source: Interachart)
Based on better financial performance & attractive valuation, Latitud is a good stock for long-term investment. However, we should be a bit careful as the stock had a sharp run-up and is now pressing against its 2010 high. I believe this could be a trading SELL opportunity.
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Latitud.